When the SEC filed a civil suit charging investment bank Goldman Sachs with securities fraud a few weeks back, I thought it was strange that Goldman Sachs officials continued to claim they had no idea that the SEC was going to bring an enforcement action against them -- a Wall Street Journal reporter writes that the bank saw the case as a "bolt from the blue." Meanwhile, SEC officials maintained they had been discussing the issue with Goldman for months. Well, the truth will out: We've learned that Goldman Sachs received a "Wells Notice" -- a formal notice that the SEC plans to bring an enforcement action against a bank -- last September. Then the bank violated industry practices by hiding the notice from investors and the Financial Industry Regulatory Authority, a financial industry self-regulatory organization, for months.
So we know, for starters, that top Goldman officials, including chief lawyer Greg Palm, lied to reporters and investors about their knowledge of the SEC's plan to file a civil case concerning the Abacus CDO. We also know that they had been hiding their knowledge over a period of months. It's a relatively small discrepancy compared to what the firm has been accused of doing in its financial dealings, but it certainly speaks to the attitude the firm has toward the public.
-- Tim Fernholz
